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AFX News Limited: Royal Dutch Shell ratings unaffected by Sakhalin deal – S&P

EXTRACT: S&P said it estimates that the transaction reduces Shell’s year-end 2005 proved reserves by some 9 pct or 1 bln barrels of oil equivalent, and reduced proved reserve life of 9.2 years by about 0.8 years

THE ARTICLE

12.22.06, 8:31 AM ET

PARIS (AFX) – Standard & Poor’s Ratings Services said its outlook on Royal Dutch Shell PLC Shell, (‘AA/Stable/A-1+’) is unchanged, following a signed agreement between the company, two Japanese co-shareholders and OAO Gazprom to give Gazprom majority control of Sakhalin Energy Investment Company Ltd (SEIC).

S&P said the agreement will reduce Shell’s stake in the giant Sakhalin-2 gas project in Russia — which SEIC operates — to 27 pct from 55 pct, in return for 4.1 bln usd in cash.

S&P also said the cash consideration is ‘slightly above’ its expectations, adding that existing liquid natural gas sales contracts will remain in force and be honoured.

The broker added that the settlement will help avoid any downside in both the project’s commissioning and budget and, in turn, will offset the 50 pct loss of Shell’s previous share of the project’s future earnings and free cash flow.

S&P said it estimates that the transaction reduces Shell’s year-end 2005 proved reserves by some 9 pct or 1 bln barrels of oil equivalent, and reduced proved reserve life of 9.2 years by about 0.8 years

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